Bank of America Global Research discusses its expectations for tomorrow's BoC policy decision.
"We expect the Bank of Canada (BoC) to remain on pause with the overnight rate at 4.50% on 8 March. The domestic economy has decelerated led by investment and by the housing sector. The labor market remains tight, but cracks are emerging. Both headline and core inflation are now trending down, and inflation expectations remain anchored. The BoC's restrictive posture is overall working as expected as the monetary transmission mechanism in Canada is stronger and quicker than in the US," BofA notes.
"USD/CAD appears to be slightly overbought vs our fair-value estimate after the rally in February. We expect FX investors to look for hawkish signs from the BoC to pare back USD long positions," BofA adds.